Planning Considerations

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What are your goals, dreams and aspirations?

Is it Financial Freedom? Security? Wealth? What is your end goal?

Many people purchase a property merely because they think it would be a good idea or a friend has said it was the right thing to do. They have no formal plan. Investing is a journey so it is critical to know where you are heading, how you intend to get there and within what time frame.
Unfortunately, most investors don’t have a plan and that’s why they get lost along the way, get distracted by the latest investment fad or the next ‘hotspot’.

At the very least, property investors should have a written plan that has personalised goals which are measurable and have a set time frame.

What name are you intending to purchase the property in?

  • Individual
  • Partnership – jointly or tenants in common
  • Company – can result in future CGT issues
  • Trusts – Unit, Discretionary, Hybrid, Testamentary, Super Fund

Before settling on a structure, consideration should be given to the following:

  • Tax planning – not purchasing the property in the right entity can potentially result in thousands in extra tax. Each structure has different methods of taxing income, ability to claim deductions plus capital gain tax issues. The right advice is imperative and is linked to the type of property you are considering. Are you looking for high yield or prefer high capital growth?
  • Asset Protection – This is important for people running businesses or who are concerned about protecting what they have built
  • Retirement planning – flexibility in owning assets and/or generating income to maintain their lifestyle in retirement while accessing government benefits.
  • Succession planning – where you want control and management to pass onto younger family members without having to sell and incur CGT, stamp duties and other transfer expenses

Understand your current situation
Knowing what assets and liabilities you have will give you a better understanding of your current financial situation and ensure you have sufficient cash flow to minimise future risks. Investing in property is a proven path to long-term wealth, however you should consider it a medium to longer term type of investment, so you’ll want to make sure that you can afford to maintain your mortgage repayments over the long term. You want to be able to sell the property when you want to not because you have to.